The Financial Conduct Authority (FCA) has published its final updated guidance on the treatment of politically exposed persons (PEPs) for anti-money laundering (AML) purposes. 

A PEP is defined as someone holding a prominent public position who is entrusted with prominent public functions either in the UK or elsewhere in the world.  

Regulated businesses that fall under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (‘MLRs’), must apply enhanced customer due diligence (EDD) when a customer is a PEP.  

The MLRs also require EDD to be applied to a PEP’s close family members or known close associates. 

The FCA first produced guidance in July 2017 for firms to apply a proportionate approach in dealing with PEPs.  

However, the introduction of the Financial Services and Markets Act 2023 prompted the FCA to review its policy, resulting in the regulator opening a consultation into the issue, which ran from July 2024 to October 2024. 

Following this consultation, the regulator published its final updated guidance on the treatment of PEPs on 7 July 2025. 

The FCA’s updated guidance on PEPs: 

• Clarifies that firms should not treat non-executive board members (NEBMs) of civil service departments in the UK as PEPs. 

• Gives more flexibility to firms in signing off PEP relationships by enabling them to allocate sign off to anyone who has sufficient knowledge of the firm’s money laundering, terrorist financing and proliferation financing risk exposure, and has sufficient authority, to take decisions affecting its risk exposure. 

• Reflects changes to the MLRs by stating that firms should treat domestic PEPs as lower risk unless there are other risk factors apparent that are unrelated to their PEP status.   

The FCA guidance confirms that the regulator expects firms to take “appropriate but proportionate measures in meeting their financial crime obligations”.  

The MLRs set out that all firms must apply a risk sensitive approach to identifying PEPs and then applying enhanced due diligence measures.  

Tn its statement, the financial regulator clarifies that a case-by-case basis is required with the risk assessment of individual PEPs rather than applying a generic approach to all PEPs.  

Read the FCA’s full updated guidance on how firms should treat PEPs to comply with their obligations under the MLRs here. 

Compliance Services for Businesses London  

At the Regulation & Compliance Office (RACO), we help accountants, solicitors, estate agents and other regulated businesses undertake a review of their policies, controls, and procedures to ensure that they are compliant with AML regulations and, therefore, avoid any breaches. 

A review of this nature provides valuable insight into a business when performed correctly. Along with an overview of risk, these crucial assessments also highlight issues within the business, so it is essential to undertake a proper review. All of a company’s building blocks must be considered, including its staff, clients, operations, and finances. 

By working with RACO, a business can be assured that we will bring the required level of knowledge and expertise needed to perform the review, which adds value to the business and is not simply a box-ticking exercise. Our team can also provide a full range of services that include: 

• Consultancy. 

• Compliance Policies. 

• Training. 

• Handbooks. 

• Auditing. 

Our services focus on businesses’ anti-money laundering and regulatory requirements through the implementation of effective policies, procedures, training, and consultancy. We also provide continued monitoring of staff and ongoing training to ensure that everyone within a business is aware of the latest requirements and complies with their responsibilities. 

We offer a full range of services focused on ensuring businesses across all regulated sectors create, maintain and evidence their compliance with the requirements of their regulators and legislation. We work with businesses of all sizes, from the smaller high street or niche businesses to the large multi-office and multinationals. 

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We adopt a sensible and pragmatic approach to fees, ensuring we are competitive and always add value. As necessary, we will agree on packaged services to control cost and enable clients to spread payments to alleviate cash flow, yet ensure services are provided when needed. 

If you want to discuss our services in more detail, contact us at 0203 985 8550, email us at info@regulationandcomplianceoffice.co.uk or complete an enquiry form.